Gearing describes the balance between money a business has borrowed and the capital its owners have put in. A highly geared company relies heavily on debt, while a low-geared company is funded mostly by its own equity.
Why gearing matters
Borrowing can help a business grow faster than it could on its own funds, but it also creates fixed repayment commitments. High gearing can be efficient in good times and risky if trading slows, because the repayments still fall due.
There is no single right level
What counts as healthy gearing varies by sector. A capital-heavy business may carry more debt comfortably than a lightly-resourced service firm.
- Gearing is about proportion, not just total debt.
- It interacts with how predictable your income is.
- Lenders read it alongside profit and cash flow.
When you consider a Credicorp Flex or Slice facility, think about how the new commitment fits your overall gearing and your ability to meet repayments comfortably.
See also: What is net working capital?, A director's loan to your own company: tax and legal points and Forecasting what your borrowing will cost over the term.